CONVERSION OF PRIVATE LIMITED COMPANY INTO LLP
Before converting the Private Company into a Limited Liability Partnership firm, let’s have an overview of the concept of a Limited Liability Partnership firm.
BACKGROUND OF LLP:
LLP is a legally recognized corporate entity, which combines the features of both the limited corporations and the traditional partnership firms. LLP is suitable for small to medium-sized business enterprises and professionals particularly. LLP has the advantage of self-governance and less compliance as compared to other types of corporate entities.
LLP is regulated by Limited Liability Partnership Act- 2008 which came in to force on 1st day of April 2008. LLP is the alternate corporate body having benefits of both corporate and partnership firms. The benefits are:
1. It is having the benefit of Limited liability to partner and Flexibility of Partnership.
2. LLP is a corporate body and granted the legal status the same as that of the company. The same is registered with the ROC, MCA
3. The liability of the partner is limited up to the contribution made by them.
HOW TO TAKE DECISIONS OF CONVERSION OF PRIVATE COMPANY INTO LLP
The analysis must be taken before to convert the private company into LLP and the same must be done on the cost and benefit basis. The LLP is having the following basis as compared to the company which are as follows:
1. The liability of the LLP is limited.
2. Less annual compliance formality i.e. Form 8 and Form 11 is included in the annual compliance whereas, in companies AOC-4, MGT-7 and ADT-1 are included
3. No such requirement to maintain statutory registers.
4. The LLP is managed through the LLP agreement
5. There is no requirement to disclose the interest of the designated partners as it is required for the directors to disclose the same in the case of the companies.
6. There is no requirement to convene the minimum meetings whereas in companies the minimum requirement is there to hold the at least two Board Meeting and one Annual General Meeting for Small Company and at least four Board Meeting and One Annual General Meeting for other than Small Company.
7. The LLP audit is required only if Turn over above 40 lacs or Contribution more than 25 lacs whereas the audit is compulsory for companies.
PROCESS OF CONVERSION OF COMPANY INTO LLP
1. Obtain Director Identification Number (DIN):
The minimum number of designated partners in an LLP should be 2(Two). One must be Indian. The person who wanted to be designated partner in an LLP must be having DIN. A body corporate through his nominee can also be a partner in an LLP.
2. Board of Director Meeting:
Conduct the meeting of the board of directors to pass the resolution for the conversion of the Private Company to the LLP. The authorization must be given to any director to apply for the name of the LLP.
3. Application for Name availability:
File Form FiLLiP for the conversion of the company to the LLP for the reservation of the name of the LLP.
4. Documentation for the incorporation filling:
For the submission of form FiLLip, the following documents are required to be attached-
- Registered office address proof.
- The subscription sheets.
- Consent to become designated partners and partners
- ID proof and Residential proofs of designated partners and partners
- Disclosure by the partner/ designated partner that he is director/ designated partner in any LLP(s) and/ or company(s).
- Copy of resolution on the letterhead of such body corporate to become a partner in the proposed LLP when the appointed partner is a body corporate and a copy of resolution/ authorization letter in favor of person acting on behalf of body corporate
5. Application filing for the conversion:
The application for the conversion will be submitted in Form 18 which is named as application and Statement for conversion of a private company/ unlisted public company into limited liability partnership (LLP). The form contains detailed information on the conversion of the company into LLP. The Mandatory attachments will be as follows:
- Statement of the consent of shareholders
- Statement of Assets and Liabilities of the company duly certified by the auditor
- List of all the secured creditors along with their consent
- Approval from any other body/ authority
- Latest income tax return acknowledgment copy
6. Certificate of Incorporation as LLP from ROC:
After the approval, the ROC, Ministry of corporate affairs will issue the Certificate of Incorporation for the conversion of the company to LLP
7. Formation of Limited Liability Partnership Agreement:
The LLP agreement will be drafted which includes the content that is:
- Name of LLP
- Name of Partners & Designated Partners
- Form of contribution
- Profit-Sharing ratio
- Rights & Duties of Partners
- Proposed Business
- Rules for governing an LLP
8. LLP Form 3 Filling:
LLP agreement will be submitted to the ROC, MCA for approval within 30 days after the conversion of the company to the LLP.
9. Form 14 filling
Form 14 has to be filled to intimate the ROC for the conversion of the company to the LLP upon receiving the incorporation certificate of LLP to be filed within 15 days from the conversion date. The Copy of Certificate of Incorporation (COI) of LLP should be attached in Form 14.
The benefits are mentioned which clearly shows that as compared to the company it is easy to maintain the LLP as it involves less cost and fewer compliance requirements. Whereas while converting the entity the proper analysis should be done before making the decision
The NeuSource Startup Mind is the finest business startup consultant that offers various services of compliances along with the registration like Proprietorship Firm compliances, Partnership Firm compliances, LLP compliances, Company compliances, GST compliance, etc.
For more information contact us on given communication details, Email Id Swati@neusourcestartup.com and Phone Number 9540026175
Also, you can check our video on what is a limited liability partnership
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